Real Estate News The other side of the rental drama: the temporary rental boom prompted the construction of exclusive buildings for the “Airbnb model” - Infobae

[BuySellBA]

The other side of the rental drama: the temporary rental boom prompted the construction of exclusive buildings for the “Airbnb model” - Infobae



Source:

https://www.infobae.com/economia/2023/08/30/la-otra-cara-del-drama-de-alquilar-el-boom-de-la-renta-temporaria-impulso-la-construccion-de-edificios-exclusivos-para-el-modelo-airbnb/

August 29, 2023


By: Jose Luis Cieri

The return of 6% to 8% per year in dollars tempts investors to build buildings with homes to rent temporarily. The new regulation that New York imposed on that model.​

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In CABA there are already more than 18,000 apartments that are rented temporarily (Photo Courtesy: Gustavo Abascal Propiedades)

The temporary rental market experienced a considerable increase as a real estate investment option, with a booming trend that has led more developers to build buildings specifically oriented towards this type of rental, especially aimed at tourism.​

And apart from the new buildings, 18,748 homes are already offered on temporary rental platforms in the city of Buenos Aires distributed in more than 20 neighborhoods.​

It is reaching pre-pandemic levels when about 21,000 units were calculated to rent for a period of one month to a maximum year. Part of the public that seeks them are digital nomads and tourists who prefer to feel at home instead of staying in a hotel.​

Daniel Bryn , Real Estate specialist and author of the Real Estate Monitor, highlighted to Infobae that profitability is a key factor. “A 1 bedroom apartment in Buenos Aires can generate an average monthly income of around USD 650 gross, with a monthly occupancy rate of 73%; when comparing the profitability between the performance of a temporary rental with the traditional one, it shows 7.41% compared to 3.15% per year”.​

Buildings designed for temporary rentals tend to have higher rents, depending on the amenities offered.​

This situation prompted new investments from developers. In fact, in the Innovation Park that will be centered in Núñez, in the former Federal Tire estate, several of the buildings that are erected are designed to be rented by students and workers who perform functions there in about three years.​

Experts suggest that designing buildings from the beginning for temporary rentals allows optimization of costs and maintenance, considering the intensive use by tourists. This can include special features such as trunks for suitcases, laundry spaces as amenities, central hot water systems and electric ovens instead of gas to avoid problems.​

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Regarding business models, developers can offer from the simple delivery of the apartment to complete rental management. This usually involves a monthly fee or a percentage of the income generated by the department. Another option is the "pool" model, where profits and expenses are divided among several departments in the same building.​

The location and the amenities play a crucial role. Coworking spaces and multipurpose rooms (SUMs) are especially popular with temporary tenants.​

In terms of long-term profitability, investment in temporary rentals can provide between 6% and 8% per year, almost doubling the average traditional rent. However, there are factors to consider, such as the decision to wait for the completion of the building or to invest in an existing property to generate income more quickly.​

Bryn advised investors to require full information on estimated income, vacancy rates and expenses when considering these types of projects. Key differences from traditional rentals include the length of the contract, rental management, and flexibility for the owner.​

In terms of initial investment, Bryn noted that it takes between $4,000 and $6,000 to outfit a one-bedroom or two-bedroom apartment for temporary rental.​

Coming Up​

One of the buildings to be built will be built in the tourist heart of Retiro -on Paraguay street- 150 meters from Avenida 9 de Julio, 600 meters from the Obelisk and all its surroundings of that Buenos Aires that was very aristocratic with buildings emblematic.​

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Alejandro Reyser , Real Estate Developers (RED), said that “we have an agreement with a tour operator who will provide the service of managing temporary rentals. In other words, all the trustors that participate in the trust (it is optional) will have the possibility of an operator doing the whole circuit to obtain income, with a minimum investment for the functional unit and to equip the unit according to the standards that the industry is currently requiring.​

The temporary rental versus the traditional rental is generating twice the profitability for the same investment with a limited risk.​

One of the projects that arrive at Retiro (Photo Courtesy: Spot Studios)

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"We have a way to go, which turns this investment into a potential situation not only of economic protection, but also of financial surplus," added Reyser.​

Currently the temporary rental market is in one of its best moments due to the scarce supply of apartments for permanent rent, the criticized rental law in force and the impact that the pandemic has left on lifestyles and new ways of working.​

Dario Erlich , from CEK Group, said that “temporary rentals become relevant due to the flexibility of the contracts and their simplicity. These projects allow profits before, during and after the work. On the one hand, entering as an investor with super competitive pre-launch values, then the revaluation of meters during the work until the unit is delivered, and lastly and most importantly, the possibility of generating a fixed income in dollars that exceeds 10%. hard currency annually.​

“We see a very good response from the sale of a building that is one of the first in the country prepared and thought from its conception for temporary rental, with hotel equipment and a property manager who manages the units with the aim of obtaining the highest income . possible in dollars," Erlich said.​

A project that will arrive in Palermo SoHo (Photo Courtesy: Haaus Hotel Living)
The price of the units starts from USD 80,000 with units of 25 to 30 m2.

Restriction in New York​

In the US, meanwhile, Judge Arlene Bluth , in charge of the Manhattan court, dismissed a claim by Airbnb and considered "rational" for the state of New York to require hosts to register and control the legality of the accommodations they offer, something that the company came to describe as a "de facto veto" to its activity.​

The platform sued New York in June and managed to postpone until September 5 the entry into force of the legislation, which seeks to regulate activity in the midst of the housing crisis and obliges hosts to register with the authorities.​

The new legislation prevents entire apartments from being rented for less than 30 days, but it does allow rentals of less than 30 days if the host is present at the accommodation and has no more than two visitors, a rule that applies not only to Airbnb, but also to other platforms.​

With these measures, the city requires that hosts register with a special office, something that for Airbnb is an invasion of privacy.​